The Retirement Crisis and Living in Mexico
Not too long ago, a friend sent me the cover story from Atlantic magazine, an article called “The Secret Shame of Middle Class Americans.” The underlying premise of this excellent article is that most people in the U.S., even if they are middle-class wage earners, could not come up with $400 immediately if an emergency struck.
My friend guessed accurately that the story would resonate with me and what I write about as an American who has chosen to live in Mexico, partly for financial reasons.
Rather than go in the red supporting the middle-class American lifestyle on wages that likely will never recover from the Great Recession, I have chosen to reduce spending in a more unconventional, bolder way.
As the U.S. moves increasingly toward a “gig economy” of remote and contract work, the option of working from Mexico or Latin America is bound to get traction, even if only to be able save enough to retire back in the U.S.some day.
For writers, I.T professionals, photographers, web designers and others who can finagle it, Mexico is a place to work, save money and live an adventure. Moving to Mexico has enabled hundreds of thousands of Americans and Canadians to retire at the normal age, 55 or so, when people used to be able to retire.
If, as the article states, 47% of people cannot save $400 for emergencies, what chance do they have of saving the outrageous sums predicted they’ll need for retirement?
According to the Trinity Study, at age 25 you could save enough for retirement if you saved 20% of your salary for 37 years at a salary of $70,000. Who wouldn’t give up before they began knowing they’ll need $1,750,000 to retire based on a salary of $70,000 year to be absolutely certain of never having to work again? By the time they took out that 20% for retirement savings, another 20% for taxes, they'd have to live on $41,300.
Past benchmarks used to define “middle class,” as I came to learn from the Atlantic article, included having enough to buy a home, a car, health care, provide education for your children and take an annual vacation. Based on that, at $41,000 you are no longer middle class at a salary of $70,000 a year. To achieve those benchmarks today would require over $120,000 a year.
Yet In a cheaper country, a young person might be able to actually save 50% of their salary while learning a second language and having the adventure of a lifetime.
Now let's say you, like me, you don't believe you will really need $1,750,000 to retire. These high savings calculations are usually based on your living on interest income and never spending down your capital.
Financial planners like to position you for living forever and wanting to leave all that principal to heirs. We all know people with less than $1,750,000 who seem to be doing fine in retirement, between social security, pensions and perhaps a house that is paid for.
If you read up on the anticipated rising cost of healthcare however, you will find it easy to believe that those who are part of a 65 year-old couple will need the estimated $317,000 savings beyond the income they live on to pay for health care costs not covered by Medicare.
Expats in Mexico shake their head in wonder that so many people, relative to the enormity of the crisis in healthcare and stagnant wages in relation to the cost of living, still think that the idea of cutting bait and moving to Mexico is crazy. The cost of a very good health insurance policy here, if you get on the plan while you're still healthy, is less than $3,000 a year.
From a budgeting standpoint, moving to Mexico at its heart is a matter of just moving to a far less expensive place. But unlike that trailer in West Virginia, you still have an truly middle-class lifestyle, with nice restaurants and great views , plus a wildly more interesting life.
Admittedly, you will have cultural adjustments and language difficulties (arguably not unlike adjusting in West Virginia, but with better food and dentistry), but you will grow personally and be enriched culturally. You will also have bragging rights and be the envy of many of your friends. If you learn the language you will probably even be mentally sharper than if you stayed at home.
Yet in spite of this, if you suggest to the average retired person or couple in their late 50’s that they might be able retire to Mexico comfortably now, most would still rather clutch the steering wheel than even consider the option.
As further proof of that, whenever I pitch stories to retirement planning magazines or blogs about all the benefits of living in Mexico, my ideas are usually dismissed as not mainstream enough, that moving to Mexico is only considered by the lunatic fringe. Not enough of their readers are that crazy.
What a disservice. Becoming an expat might save someone from aging in destitution. I know several single women in Mazatlan living very pleasant lives on their pensions alone. They could never do that in the U.S.
Understandably, our lives and relationships are important to us. To that my argument would be how much more difficult relationships will be to maintain when you are poor.
When you laugh, the world laughs with you. When you cry, you cry alone.
Many people living in Mexico are enterprising enough to figure out ingenious ways of spending months in the U.S. if they want to stay close to family and friends. Between these long visits and Skype, you can keep those relationships alive and well - and your options open.
This reasoning is still considered wild and crazy. Such is the strength of the misconceptions that exist about living in Mexico.
What bothers me most is that those retirement planning websites and financial planners don’t take the expat lifeboat more seriously. Likely the most you’ll see will be an annual, practically worthless template article by International Living, probably written by some copywriter and pretty suspicious in its glossing over of the obvious questions.
These articles are nothing like the in-depth articles on senior discounts on changing your own oil you'll see on retirement planning sites. They should be covering the expat option with the same seriousness they cover phone scams.
People living with retirement anxiety need to know that the expat option is real, practical, and that living abroad gets easier every year through technology. Information should be presented in a way to be taken seriously, because the retirement crisis for middle-class, middle-aged Americans is serious.
Middle-class people who are worried about their money lasting should be encouraged by these “experts” to seek some perspective on the propaganda out there about Mexico, including those stories of what happened to someone according to someone else they also don't know.
Setting it all up to live in any less expensive country can take several years. The time to chart it all out (and learn some Spanish) is earlier than you think.
Living in Mexico isn't for everyone and you don't have to take my word for it, but over a million Americans, 500,000 Canadians and my three single lady friends in Mazatlán are probably on to something.
Financial planning and retirement planning publications should encourage their readers to learn the facts about Mexico, even as the hope for a secure, worry-free future in the U.S grows ever dimmer.
“America’s Looming Retirement Savings Crisis” - CNBC
"“The Retirement Crisis is Getting Truly Scary” - Slate magazine
"The American Retirement Crisis in Five Charts” - Fiscal Times
"The Retirement Crisis is Real" - Huffington Post, along with a slate of similar articles.
"The American Retirement Crisis is Real" by The Week
"What you don't know about America's Healthcare system now could bankrupt you later" - Ventanas Mexico
Next up: Once you have ducked out of the American economy, you see it from an entirely different perspective
Most recent: An examination of the world's most dangerous cities and our skewed concept of danger itself
Take a fun quiz on where to live in Mexico by Mexican Guru - I took it and it gave me Mazatln!
Hola, I am a partner with Ventanas Mexico which provides insight and resources to those considering expat life in Mexico, most recently "If Only I Had a Place" on renting, for aspiring expats only.
My first book, and love, was writing the "Interactive Guide to Learning Spanish Free Online," a curation of the best Spanish language tools on the web. Create unique plans every day or use the plans in the book.